Our studies have defined a central pathway for blood development involving the homeobox genes cdx4 and hoxb4 that enables us to direct the differentiation of embryonic stem cells (ESCs) into hematopoietic stem cells (HSCs). By expressing these genes sequentially in differentiating ESCs, we generate hematopoietic progenitors with the cardinal features of definitive HSCs: rescue of lethally-irradiated mice; long-term multilineage (lymphoid-myeloid-erythroid) hematopoietic chimerism; and serial engraftment in secondary mice. Retroviral integration analysis of fractionated myeloid and lymphoid cells in long-term engrafted mice reveals multiple common proviral integration sites, thus providing clonal evidence for self-renewing, multipotential HSCs from murine ESCs (which we term the ES-HSC). We now wish to define the precise developmental origin of these cells and the role of the cdx-hox pathway in specifying their fate. Our fundamental hypothesis is that ES-HSCs are the in vitro equivalent of the definitive HSCs that arise in the aorta-gonad-mesonephros (AGM) region of the embryo. Both ES-HSCs and AGM-HSCs are precursors of adult bone marrow HSCs and have distinct features that we will study in order to shed light on basic principles of blood development. We will determine whether the ES-HSC derives from the primitive hemangioblast progenitor-the in vitro equivalent of extra-embryonic or yolk sac mesoderm-or from the equivalent of intra-embryonic lateral plate mesoderm, which would validate our hypothesis. We will use a conditional genetic marking system to trace the fate of primitive yolk sac hematopoietic progenitors in embryos to test the hypothesis that these cells contribute to embryonic blood formation but are thereafter destined for extinction, to be replaced by intraembryonic definitive HSCs that dominate for the life of the animal. These experiments address classic questions in developmental hematopoiesis, and establish important principles for future attempts that we will make to derive HSCs from human ESCs (WA09/H9 and UC06/HSF6).